RCEP goes into effect today
The Regional Comprehensive Economic Partnership or RCEP goes into effect today.
The 14-country free trade agreement includes the Association of South East Asia Nations, China, Japan, South Korea, Australia, and New Zealand. It is the world’s largest trade agreement covering 30% of Earth’s population. RCEP remains one of the few major multilateral free trade agreements that emerged during the Trump presidency when global political support for free trade declined.
COVID-19 hit Asian economies hard, erasing roughly $1.7 trillion from the combined GDP of Asia’s largest economies in 2020. RCEP is projected to increase member economies’ incomes by 0.6% and add $245 billion and 2.8 million jobs across participating nations by 2030. Such economic gains will help RCEP’s members as they strive for post-pandemic growth.
Expect RCEP’s benefits to materialize slowly. Although RCEP met the ratification requirements needed to take effect, major economies including Indonesia and the Philippines have yet to successfully ratify the agreement. Worse, US and Indian withdrew during negotiations meaning that RCEP has significantly scaled down from its original vision. Still, the aversion to free trade which prompted the countries’ exits is waning, boding well for RCEP’s promise to cut down bureaucratic red tape inhibiting intra-Asian trade.
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